At its core, estate planning helps ensure that your assets will pass to the people or institution you designate in a manner you see fit, in the event of death or disability. A properly prepared estate plan can help reduce or eliminate estate taxes, specify who will care for your minor children if you are unable to do so, and allow your property to pass to your chosen beneficiaries without the lengthy and costly process of probate.
An estate plan typically consists of a will, living trust, heath care directives, power of attorney, life Insurance, and retirement accounts.
Great! However, be aware of major life events that often call for estate plan changes. Life changes that might warrant revision of your estate plan include birth, adoption, marriage, divorce, disability, a significant change in your financial situation or that of your beneficiary, or relocating to a different state.
Your estate plan should be revisited over time to make sure it continues to meet your evolving needs and reflects the latest tax changes.
As Benjamin Franklin has famously said, nothing in life is certain as death and taxes.
No one likes to think about dying but it is important to understand that a valid will is one of the most important financial arrangements a person can make during their lifetime.
A will is a trusted legal device that sets forth the distribution of your personal and real property, and the care of any minor children. Dying without a will or trust, allows the state to decide who gets your property, without regard to your wishes or your loved one’s needs. A will, like a living trust, is flexible. You can leave all your property to one person or split it up in small, specific portions, such as your wine collection to your brother and your laptop to your best friend. If you own a business or have investments, your will can ensure the smooth transition of those assets. Tax implications are another important issue to consider, as a well drafted will or trust can minimize tax liability. See Estate Tax FAQ below for New York State and Federal estate tax rates.
Practically you can. Then again, you can also give yourself a haircut and paint your own self-portrait. The question is will it come out good looking. Probably not. As previously emphasized, your will and trust dictate what happens to your property, who will raise your minor children, and names the person (executor) who will carry out your wishes upon your death. Dealing with an estate is a tricky business, and can take months or even several years if not properly planned. Drafting your own will or trust comes with one pro (saving money) and many cons. Do-it-yourself wills and trusts document that you may find online or at stationery stores come in a one-size fits all solutions, which do not account for real life situations. So, before you try and save a few hundred of dollars, consider the expensive and unpleasant consequences your loved one’s may have to endure if you make a mistake. Just like you leave you car tune up to a mechanic, leave your estate planning needs to a professional.
While wills generally cover the transfer of all your assets, most people are surprised to learn that there are a variety of items in which other contracts or agreements supersede the will. These items include life insurance, retirement assets, property owned as joint tenants and tenants by entirety, and investment accounts with the “transfer on death” designation.
A prime example is life insurance proceeds. Regardless of what an individual’s will or trust states, the beneficiary listed on the life insurance policy will trump the beneficiary listed in the estate planning documents. Upon the person’s death, the policy proceeds are transferred automatically to the named beneficiaries, with no probate or court proceeding necessary. Thus, it is vital that an individual review beneficiary designations to make sure that it is coincides with their will or trust.
If an attorney drafted the will of the decedent, then the attorney retains a copy of the will in his office, and the original is given to the client. The original will of the deceased should be filed in Surrogate’s Court in the county where the decedent had their primary residence or owned real estate.
If a person dies without a will or a trust, then that person is considered to have died “intestate.” New York’s intestacy statute provides for the distribution of a deceased person’s property in the following order: (1) the surviving spouse inherits the entire estate, if the decedent had no children; (2) if the decedent did have children, then the surviving spouse inherits $50,000, plus one-half of the remainder of the Net estate, with the remaining one-half equally distributed among the children; (3) If there is no surviving spouse, then the children inherit the entire estate; (4) if the decedent had no children and no spouse, the estate is distributed to the decedent’s parents, if deceased, then to their issues (decedent’s siblings); (5) If none of the above, then one-half to the maternal grandparents and their issue and one-half to the paternal grandparents and their issue;
or (6) if none of the above, then one-half to the great grandchildren of the maternal grandparents and one-half to the great grandchildren of the paternal grandparents; or (7) if none of the above, the property escheats to New York State.
You must file an administration petition along with a certified copy of the death certificate, and any other supporting documents, in the Surrogate’s Court located in the county in which the decedent had their primary residence. The filing fee is based on the size of the estate. See below.
Surrogate’s Court Fee Schedule for filing a petition for Probate, Administration, or Accounting in Kings, Queens, Bronx, Richmond, Nassau, Suffolk, and New York County:
Value of Estate or Subject Matter Fee Rate
Less than $10,000 $45.00
$10,000 but under $20,000 $75.00
$20,000 but under $50,000 $215.00
$50,000 but under $100,000 $280.00
$100,000 but under $250,000 $420.00
$250,000 but under $500,000 $625.00
$500,000 and over $1,250.00
Check with the Surrogate’s Court in the county of the state where the decedent lived. If the will was filed, it is open for inspection by the general public, and you can purchase a copy. Or, you can hire a lawyer or legal service agency to do the search and get a copy for you.
Whenever an individual dies without a will, or fails to appoint a personal representative (called “Executor”) in their will, the court appoints a legal representative called an “Administrator” to settle the decedent’s estate. Order of preference to serve as an Administrator of the estate is granted to the individuals who are to receive a distribution from the decedent’s estate in the following order: surviving spouse, decedent’s child or grandchild, parent, brother, sister, niece or nephew, aunt or uncle. An interested party must file a petition with the Surrogate’s Court seeking to be appointed as Administrator. Notice of the petition is then sent to all potential heirs of the estate, advising each that they must appear in Court on a certain date and voice any objections. The right to object is deemed waived if the person does not object on such date.
The principal duties of a personal representative are:
- Inventory and collect the assets of the decedent;
- Manage those assets during administration;
- Pay claims of creditors and tax collectors of the estate;
- Distribute the remaining assets to the designated beneficiaries.
The administrator/executor of the estate has the right to sign documents, sell property, and distribute assets on behalf of the estate.
The personal representative is entitled to compensation for performing his or her duties, with the fee based on the size of the estate, unless the will provides otherwise.
Probate property is property that passes under intestacy (decedent dies without a will) or under the decedent’s will. Non-probate property passes under an instrument other than a will (e.g., joint tenancy property, trust, life insurance, or pension plan proceeds). In New York, when a decedent dies with or without a will and his personal property exceeds $30,000, a probate proceeding must be commenced (The amount is $20,000 for persons dying before January 1, 2009).
Probate is a legal process whereby a court oversees the distribution of assets left by the decedent. The process is costly and time-consuming, and creates a public record of matters you may wish to keep private. That’s why creating a trust, which help estates avoid probate, is the favorable decision for most. You can avoid probate by (1) transferring assets into a Trust; (2) designating a beneficiary on your life insurance policy; (3) if you hold property as a joint tenant or tenants by the entirety; (4) retirement plan proceeds; or (5) designating a person you wish to receive any money in your bank account upon your death (payable-on-death bank accounts).
Just like a will, a living trust allows you to leave your property to the beneficiaries you chose – with the major plus of avoiding probate. Living trusts are the most popular way of transferring property outside of probate. They are flexible. You can transfer all your property to a trust, or transfer one asset to a trust, leaving the rest by other devices. When setting up a living trust, assets are transferred from your name to the name of your trust. Legally you are no longer the owner of the assets; everything now belongs to your trust. However, you are able to do anything with your assets that you could do before they were transferred in the trust: buy and sell assets, amend your trust or revoke your trust. Nothing changes except the name on the title. As a named trustee of the trust, you retain FULL control of the assets placed in the trust until your death. During your life, you don’t have to file a separate tax return for the trust. You report any gains or losses from any property placed in the trust on your individual income tax, using your own social security number. Only if your trust is an Irrevocable Trust – meaning it will continue after you die- will a separate tax ID number and tax return be required. A living trust is not immune from estate taxes.
Under New York law, you can disinherit your children but you cannot disinherit your spouse. New York law provides a surviving spouse with a “Right of Election.” Under the Right of Election, a surviving spouse is entitled to the GREATER of $50,000 or 1/3 of the net estate (after debts, administration expenses, and funeral expenses, but before taxes). The surviving spouse can either take what was left to them in the will or can elect against the will and instead take this elective share. For example, if the decedent left his spouse nothing or $100,000 under his will, and his estate is worth $600,000, the surviving spouse can elect to take what is left to her in the will ($100,000) or $200,000. In order to take under the Right of Election, the surviving spouse must exercise this right within six months from the issuance of the letters testamentary or letters of administration but no more than two years after the decedent’s date of death. The Right of election can be waived by a prenuptial or postnuptial agreement. A surviving spouse may also be disqualified from exercising a right of election. A surviving spouse cannot claim his Right of Election if (1) a final decree of divorce or separation was entered; (2) the surviving spouse procured a divorce not recognized in New York; or (3) the surviving spouse abandoned the decedent of failed to support the decedent, up until the decedent’s death. Some of the few ways to defeat Right of Election is by irrevocable trusts and life insurance policies.
Generally, no. Debts that were incurred during the decedent’s life were the personal obligation of the decedent, and as such only the estate is liable for such debts. A beneficiary under a will or trust or a family member of the decedent, cannot be made personally responsible for the decedent’s debts without their consent. The estate may not have any money left for the beneficiaries after paying the creditors, but the beneficiaries will not owe the creditors money.
Your estate may have to pay Federal and New York estate taxes before your assets can be fully distributed to your beneficiaries and heirs. Both taxes are expensive and must be paid by your estate within nine months after death. Your estate will have to pay Federal and New York estate taxes if the net value of the estate is more than the “exempt” amount set by legislature. No estate tax will be imposed on the estate of unless the value of the estate exceeds the applicable exemption amount. For 2015, the federal exemption amount is $5.43 million per person, with a 40% tax rate applied to any excess over the exemption amount. The New York estate tax exemption is outlined below.
|Date of Death||New York Exemption|
|Apr. 1, 2014–Mar. 31, 2015||$2,062,500|
|Apr. 1, 2015–Mar. 31, 2016||$3,125,000|
|Apr. 1, 2016–Mar. 31, 2017||$4,187,500|
|Apr. 1, 2017–Dec. 31, 2018||$5,250,000|
|On or after Jan.1, 2019||Same as the federal exemption|